Monday, April 1, 2013

As the US military makes a show of force on the Korean peninsula, the iShares MSCI South Korea Index Fund (EWY) made a show of force of its own climbing into Quant’s top 10 for the first time this year.  Like a stealth bomber dropping its payload before anyone notices it, this one has been a bomb before it appeared on our radar.  It ranked as low as 344th early last month and 135th the week before last when it seems to have put in a bottom after falling 12% this year.  It gained altitude last week climbing the double digit ranks into this morning’s 8th place.

You don’t have to be the only fat guy in an entire country to know how to read a chart as even amateur technicians can see that EWYs correction has brought it down to its magnetic 200 day moving average.  Getting your ruler out will show it also sitting on an uptrend line from the major 2009 bottom.  That has helped its technical score recover from 45.1 at the bottom to 55.6 today.  Heightened political tensions have pushed the sentiment score up to a high 91.1 which is most responsible for the fund’s good showing lately.  Fundamentally it is OK but not great scoring in the mid 60s.  Our behavioral and fundamental measures comprise EWY’s Green Diamond Reward Rating which has crossed above 9 today.  Quant also likes South Korea giving it an 80.6 country score and iShares can’t do much better than its 98.4 firm score.  Those two measures factor into the fund’s 4.87 Red Diamond Risk Rating which regular readers will notice is higher than average for top rankers lately.

You don’t have to like the rapper Psy to like EWY but you do have to like Samsung which accounts for more than 22% of AUM.  Better earnings out of the gadget maker could boost those fundamentals and drive the fund higher on that uptrend line from 2009.  Even without that, the 73.4 Behavioral Score suggests this one’s going to do it “Gangnam Style” for a little while.  We don’t know what that means but after a 10% quarter we are glad to see our models suggest alternatives to the broad US market.  We are not seeing a shift yet as Canada is the only other country represented in the top 10 but our eyes are on our radar screens.  Thank you for keeping your eyes on ETFGsm, have a good week.

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